Financial Coupling: It’s Not About 50-50

Stop Fighting About Money

Whether it’s through marriage or cohabitation, there comes a point in most serious relationships where “his and hers” extends beyond the toothbrush holder. We’re talking bank accounts and savings accounts, investment strategies and retirement plans. Yeah, the big stuff. The “oh that’s tough to talk about” stuff.

Here’s the thing: Life is complicated and money is messy. You make more than he does. He has more debt than you do. You have student loans to pay; he has child support payments to keep up with. You’re joining lives but combining assets might be the most complicated part of that exercise. Because while your relationship might be a 50/50 commitment, your money most likely is not. But by maintaining honest, open communication about your expenses and income, creating a plan that works for both of you despite your money baggage and being fixed on a shared goal, you can avoid the number one reason relationships fail in the first place: fights about money.

In a recent study by Kansas State University, researchers found that arguing about money is “by far” the top predictor of whether a couple will get divorced. Those arguments tend to take longer to recover from and are more intense, researchers said. They also often last much longer than fights over the kids, sex or in-laws. So, whether you’re just moving to the financial part of your relationship or you’ve been charting the waters for a while, here’s how you can ensure fairness and avoid financial surprises.

Yours, Mine and Ours

In two-income couples, the easiest setup is to have individual accounts where both partners maintain their own assets but then have a joint account that both fund to pay shared expenses. It’s the least complicated way to share the financial burden of day-to-day expenses while maintaining financial independence, says Emily Sanders, managing director of United Capital Financial Advisers in Atlanta. And it’s very common — 42 percent of couples that have joint accounts also maintain personal accounts, according to a survey by TD Bank.

“We’ve worked with couples from age 22 to 92,” Sanders says. “And some of the most happily married couples I’ve seen are ones that kept their money separate for their entire marriage. It takes away some of the power and control issues that tend to be associated with how we use our money.”

After all, if you’re both contributing to the joint expenses, you still have a personal account with your money that you can spend however you wish, whether that’s a new Michael Kors handbag or a weekend getaway with the girls. If you don’t like the joint account idea (or aren’t ready for it), you can simply divide who pays which bills. For instance, maybe you pay the mortgage but your partner pays the car loan and insurance payments. But that setup lacks transparency. If one of you suddenly can’t keep up the bills, it might not be apparent until the final shut-off notice comes from the electric company.

A joint account requires transparency, mutual trust and shows a shared commitment toward a common goal. Sanders also recommends adding each other’s names to the apartment lease or house deed. This increases the equity in the relationship and avoids the “his house” or “her apartment” language. It’s yours together now, both the pleasure and the responsibility.

What If One Makes More?

Odds are that you and your partner will earn different salaries, and those amounts might vary wildly. So is it fair in that case to split the mortgage 50/50? No. “Fair doesn’t necessarily mean equal,” says Kelley Long, member of the National CPA Financial Literacy Commission.

Instead, Long says, do some math. Make a list of all your combined expenses: housing, taxes, insurance, utilities. Then talk salary. If you make $60,000 and your partner makes $40,000, then you should pay 60 percent of that total toward the shared expenses and your partner 40 percent. For instance, if the rent is $1,000, you pay $600 and your partner contributes $400.

To do this fairly and equitably, have both you and your partner set up a direct deposit from your individual accounts to the shared joint account for your agreed share of the expenses. And then review the bank statement each month for that account as well as the bills that are coming in. Change happens. The cable bill goes up; the gas bill is higher than expected. Be ready to adapt to changes and keep some money in reserve in your personal accounts to cover any unexpected overages.

Deciding Who Pays for What

In the simplest terms, your budget discussion starts with the question: What are our shared expenses? The mortgage, electric and gas bill are given. But then how do you handle her student loan payments? The loan for the car you bought way before you knew your partner? The balance on your credit card bill?

These are individual decisions, but solutions happen by talking this out. If your partner has a lot of debt, maybe you offer to help her out with the payments so she can set herself free sooner, thus creating a shared goal. Or maybe you take on a larger percentage of the household expenses, thus freeing her to tackle her debt payments. If your partner insists on paying her bills by herself, maybe you can be the one to pay for the “fun” stuff from your personal account, such as dinners out, so as to ease the burden in other ways.

Budgeting isn’t just about immediate needs. Think about the future as well. Do you want to buy a second home? Save for the kids’ college educations? Have you always dreamed of touring Europe? Are those shared expenses or individual ones? The answers are different for every couple based on how much each person earns and what each person sees as a priority. But the important thing is to have the conversation, figure out what your goals are and devise a strategy to get there.

Saving for the Future

Your savings plan should be the result of a joint decision based on your long-term and short-term goals. Maybe your short-term goal is to take a vacation next year and your long-term goal is to buy a house. Make sure your partner not only knows about these plans, but is on board with them. When you’re both saving toward the same goal, you will get there faster.

Commit to a saving level you are both comfortable with and then deposit that amount in a joint savings account each month. Maybe you both agree to save 10 percent of your earnings, understanding that this means one person will be making bigger savings deposits but that you’re both taking the same financial hit.

When you figure out how much you are both saving, don’t forget to take into account your 401(k) contributions which are automatically deducted from your paycheck. If you are putting 5 percent in your 401(k) and your partner is only putting 2 percent, you might want to have a discussion about how you will both meet your retirement goals, and whether those contributions need to be modified.

If you fight over this, don’t be surprised: Conversations about savings can be fraught with conflict, says Long. Couples don’t always see eye-to-eye when it comes to savings strategies. Often one person is focused on the long-term and religiously puts away a significant portion of her income. The other is content to spend most of what they have left over after expenses, allowing the other to shoulder the burden of saving. This can lead to one person having a big nest egg and the other not.

“This is where a lot of the fights come out,” says Long. “The saver squirrels money away and then feels, ‘I’m the one who made these sacrifices to save money and so it’s for me and my fun and I get to decide how to spend it.’” In those situations, where one person is resistant to saving, Long has advised that one person take on a greater portion of the saving while the other takes on a greater portion of the expenses. Then the couple feels that the burden of expenses, and therefore also the benefit of the savings, are being shared.

How to Invest

You might want to be very aggressive in your investing while your partner is content to keep his money in a low-risk, low-interest-bearing, savings account. If that’s the case, sitting down with an investment advisor could be the best way to find middle-ground, says Sanders. “You need to view your investments simultaneously to ensure that you’re not duplicating efforts and that your overall investment strategy is consistent and makes sense,” says Sanders.

Whether you seek outside help or not, you should both be aware of where your money is invested, how well those investments have done and have a shared plan for retirement. Do you dream of retiring at 55 but your spouse has been planning his retirement strategy on working long beyond that? Unless you communicate those issues you will have a surprise waiting for you at your retirement party (and not a good one).

Divvying Up Duties

Managing money isn’t just about figuring out how to share the expenses. It’s also about making sure the duties of money management are equally distributed. “I have without exception never met anyone where there wasn’t one partner being the money manager and the other just kind of knowing what’s happening,” says Long. “And it is easier to have one person do the tracking. But where it can be impractical is where one person maintains willful ignorance about how their habits are affecting the family finances.”

For that reason, Long recommends couples have regular money meetings. They can be weekly, monthly or quarterly but regardless, the person who is in charge of paying the bills and managing the accounts shouldn’t be the only person who knows how much money there is, where it’s going and where it’s kept.